Jobs, Budgets, and Ballyhoo: An honest look at the state of the Wisconsin

1. Where is Wisconsin going? • Jobs, Budgets, and Ballyhoo: • An honest look at the state of the Wisconsin

2. Overview ■About WISTAX ■The state economy: Dissecting the rhetoric ■State finances: Getting to the truth ■Local implications: Sniffles and pneumonia ■Ballyhoo: Trying to understand state politics ■Wrap-up and questions

3. State economy: The long view WI PCPI as % US

4. A closer look at total income growth WI < US WI > US Manufacturing dominant, cyclical, lead/lag

5. . . . the economy and joblessness % Unemployment (Mo.) Lower (labor pool?), lead/lag

6. . . . the economy and job growth? % Chg. Employm’t vs. Prior Yr Wis Lags? Wis Leads? HEADLINES: WI vs. Prior Month <0

7. The longer employment picture

8. Key factor overlooked — firm creation Firm Creation Rate New Firms as % All Firms, 1992-2009 But, good news . . . Our firms survive: New firms in ‘96: WI US Alive in ’06 44% 34% Alive in ’10 36% 27%

9. State finances: Background to mischief ■State peculiarity: State taxing, local spending ■State budget is not: Local aid > half of GPR spending ■Legacy of state fiscal mischief: The 1990s Boom in school aids, Medicaid & tax relief ■Age of tricks: Late 90s and 2000s Tob. bonds, transfers (DOT!), borrow/ refinance, acctg tricks, and fed. stimulus ! 55% - 60% 80%

10. Making state finance worse: Medicaid ■The monster eating Wisconsin: Medicaid

11. Still worse: recession denial ■Recession comes early: More deny, defer ■Reserves? Wis. (poster child) vs. other states ■Spending? Growth topped most states (NASBO) ■PS: Taxes? Among largest hikes in US ($3bn 08-11) ■Federal stimulus pays for ongoing state programs $7.0b - $7.5b, 05-08 $12.2b, 10-11 $9.5b, 12-13 ■A recession . . . and 10+% spending growth?

12. The result: State’s perpetual IOUs The IOUs: ‘Structural deficit’ For example: 2011-12—$1.4bill. in IOUs vs. $1.5bill in new revenue’

13. New state budget: Out of options? Cards dealt . . . Cards played ■$1.4 bill. IOUs – 1st yr. All 11-13 revenue used ($1.5b) ■Medicaid needs $1.8b Increase MA $1.4b ■Other options? No tricks, tax hikes (pledge) ■Balanced budget req’d Cuts, fringe benefit chgs Debt restructuring

14. Result: 2011-13 state budget 2011-13 State Budget (Act 28) Comparisons to Prior Fiscal Years, All $ Bill.

15. Local fallout of state budget battle ■ Aid cuts inevitable (Doyle & Walker) ■Challenge for loc. gov’t: labor intensive ■Costs: WI vs. US —No’s? salaries? fringes? ■Choice: Cut compensation vs. people ■Cost relief with 3000 units of gov’t? ■Collective bargaining changes? Left to you . . .

16. Which brings us to ballyhoo, as in political ■ Spring in the Capitol mud ■ Senate recalls in the summer heat — Nonpartisan analysis of summer results — Past political spin to voter message? ■Now . . . More senate recalls + Gov. + Lt. Gov ■Caveat: How I change gov’t policy

17. What are the impacts? TX debate disapp’t Gov. ■ For Wisconsin internally — If governor survives recall — If governor doesn’t survive — Why it may not matter ■For Wisconsin externally — Brains, products, images — Image of Wis? (cog. map) Rick Perry Packers chaos cold protests Wisc. “The outside image of Wisconsin is of a state in turmoil” — Prof. Larry Sabato, U. Va. Jan 25 Wis St Jnl Employee transfer? Faculty recruitment? Business relocation?

18. What is the real problem? ■ Fiscal: Short-term thinking, actions w/o consequence ■ Why? Wisconsin political landscape: ─ full-time, careerist legislature ─ power shift to party leaders and interests ─ elections reward ends of spectrum ─ media decline ─ diminishing public service ethic or . . . ?

19. Not entirely new problem (1787) Madison, The Federalist Papers, #10: “Mischiefs of faction” “Complaints are everywhere heard . . . that our governments are too unstable, that the public good is disregarded in the conflicts of rival parties. . . . [which are] adversed to the rights of other citizens, or to the permanent and aggregate interests of the community . . . different leaders ambitiously contending for pre-eminence and power . . . have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them [citizens] much more disposed to vex and oppress each other than to co-operate for their common good.”

20. Ideas for change? ■ Part-time citizen legislature: less time, pay, staff ■ Smaller assembly districts? Session limits One long senate term? Gov? Supreme Ct? Nonpartisan body? Spring election? ■Nonpartisan redistricting? No ‘fence-me-in’ laws? ■Ballot reform: Instant run-off (rank choices) ■Diff. methods of ballot access (just primary?) ■Unicameral (and nonpartisan?) ■Multi-member districts?

21. Wrap-up: Good news? Bad news? ■ No 2013 ‘structural deficit’ (see ’97-’11) ■ But fin. statements have $3 bn GAAP deficit ■Budget looking forward, not backward ■Reform? Taxes, schools, loc. gov’ts higher ed. finance, economy ■Local units—budget options, but also stressed ■State dysfunction: fiscal, no?; political ?!

22. Thank you . . . and questions, or critique? www.wistax.org 80 YearsofNonpartisan Research and Citizen Education